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A year of unpredictable economic volatility
In the face of global financial turmoil, the Vietnamese economy has been no exception to unexpected volatility – one of the most challenging issues that the country has struggled with this year.
What started out as a mere fear of recession, has spread into global panic, with many of the world’s economies fearing the recurrence of the Great Depression of the 1930s.
Even before the chaos spread, global price storms were felt, the price of almost everything is skyrocketing, with oil notably peaking at an unprecedented US$147 per barrel. In the face of all this, inflation at home was pushing struggling families in Viet Nam back below the poverty line and smothering businesses.
The country’s consumer price index (CPI) continued to skyrocket in the first half of the year, with the worst inflation the country had seen in over a decade. The General Statistics Office (GSO) expects CPI to close off at 22-24 per cent for the year.
As families struggled to feed themselves, the Government took action in March, devising and enforcing eight major measures to bring the situation under control. Key measures included tightening monetary policy, bolstering exports, forcing State-owned giants to cut costs and suspend unnecessary projects, capping oil, power and coal prices, and ensuring a comprehensive supply of essential goods like petrol, rice, pharmaceuticals, cement, steel and fertiliser.
More than two months later, these efforts paid off, as families saw prices come back under control with inflation easing thanks to lower growth rates as of June this year. Unfortunately, the year’s financial problems had only just begun. Just as inflation was easing, the country felt the domino effects of slowdowns of major economies like the US, Japan, Germany, the UK and China. Governments everywhere pumped hundreds of billions of dollars to bail out their economies and support enterprises, but reports of failing businesses and rising unemployment continued to fill the pages of the newspaper.
With its economy intertwined in the global scene, Viet Nam also witnessed the initial signals of economic slowdown. After 18 months of ceaseless increases, month-on-month CPI fell 0.19 per cent in October and continued to drop 0.76 per cent in November. The GSO predicts that CPI will continue to fall in December.
As countries put all of their resources into keeping their own economies up, Viet Nam suffers the consequences, watching falls in foreign direct investment, industrial production, exports, and subsequently consumption in the fourth quarter.
To deal with this economic downturn, while avoiding inflation, the Government issued five groups of solutions at a conference in mid-November. Most notably, it pledged to inject US$1 billion from the nation’s foreign reserves to stimulate the economy.
At a meeting with young enterprises on December 14, Deputy Prime Minister Nguyen Sinh Hung said the money would be used to build houses for the poor, support farmers, workers and students and others feeling the greatest impact of the global economic crisis.
The fund would be used for infrastructure construction, irrigation work, schools and hospitals. The Government also pledged to exempt or reduce company taxes.
Hung later unveiled an economic stimulus package of up to $6 billion, with the final figures and specifics to be announced by the end of December.
Global and domestic economic turmoil have inevitably had their consequences. While the country originally targeted a growth rate of 8.2 per cent of GDP, that figure had to be cut. As the end of the year approaches, that figure will likely be close to 6.5 per cent. That figure is still impressive in the global context, and foreign direct investment should still reach over $60 billion, with the trade deficit hitting around $17 billion.
Expanded Ha Noi
One of the country’s greatest geographic changes of the year was the expansion of the capital’s administrative borders, ratified by the National Assembly in May, and coming into effect on August 1.
The new capital now has a total area of 3,325sq.km (or 334,470ha) with a population of over 6 million, double from the previous 3 million, living in 29 districts and 577 wards, communes and townships.
The expanded city includes the former Ha Tay Province, four communes from Luong Son District in Hoa Binh Province, and Me Linh District in Vinh Phuc Province.
Those borders continued to be changed throughout the year, as municipal authorities decided to set up Ha Dong District (instead of the previous Ha Dong City) and Son Tay Township (instead of the previous Son Tay City), at a four-day meeting of the Ha Noi People’s Council that concluded on December 12.
Historic rains and flood
The severe rain that flooded Ha Noi’s inner city blocked traffic not only in the downtown area, but also the Lang - Hoa Lac freeway.
While the country is no stranger to natural calamities, the capital and its neighbouring regions suffered severely this year, witnessing from October 30 to November 3 the most serious rains they had seen in the past 24 years.
The damage was extreme for the area, costing both dollars and lives. The death toll reached a devastating 94 and damages are estimated at VND7.3 trillion ($430 million), according to official statistics from the Ministry of Agriculture and Rural Development (MARD).
Tens of thousands of households were waterlogged during the flood, while transportation, power stations, health care centres and schools were also seriously damaged.
The rains may be over, but the damage to regional agriculture will continue to be felt. The floods destroyed 210,000ha of vegetables, 30,000ha of rice, 10,000ha of orchards, 40,000ha of fish ponds and nearly 200,000 livestock animals.
The deputy director of the National Centre for Hydro-meteorological Forecast, Nguyen Lan Chau, said that such sudden heavy rain had rarely occurred in the country’s history, noting that the root cause was almost certainly global warming.
Affected provinces included Nghe An, Ha Tinh, Hoa Binh, Vinh Phuc, Thanh Hoa, Quang Binh, Quang Ngai, Bac Giang, Ninh Binh, Thai Nguyen and Phu Tho.
UNSC chair
Viet Nam made history on the world stage this year, taking a seat for the first time as a non-permanent member of the United Nations Security Council (UNSC) on January 1 for the 2008-09 term.
The position was heightened as the country took the chair of UNSC in July.
Taking advantage of this position, Viet Nam affirmed its increasing political role in settling issues of international conflict to ensure security in the world.
"Viet Nam is committed to contributing to the settlement of conflicts through dialogue and peaceful negotiation, and respects the independence, sovereignty and territorial integrity of all countries," said Ambassador Le Luong Minh, Viet Nam’s permanent representative to the UNSC at a conference in July.
The country took part in important activities of the UNSC and chaired a high-ranking open discussion following the monthly agenda. Viet Nam further helped build UNSC working programmes and agendas and helped countries reach joint agreements.
Viet Nam hosted and managed around 40 closed and public conferences in July. In its capacity as chair, the country worked with media outlets and reported the outcome of UNSC’s conferences to UN member countries.
As the main representative of the UNSC, Viet Nam also held regular meetings with the UN Secretary General and other senior leaders of the UN’s Secretariat, the President of the UN’s General Assembly, the President of the UN’s Economic and Social Council, and those countries whose pressing issues needed attention.
Uncle Ho
As Viet Nam reaches new heights and moves forward, it continues to remember the past and pay tribute to its national hero. The movement ‘Studying and Following the late President’s morals’ was evidence of this, with several activities carrying his legend forward.
One of these activities reached out to thousands of local residents and Vietnamese living abroad, encouraging them to come forward in a competition on telling stories about Ho Chi Minh’s exemplary morals.
Dozens of other activities helped remind the Vietnamese people, from leaders and senior officials to workers and farmers, that in these times of change they must strive to lead a virtuous life, struggling against corruption, red tape and waste.
Environmental woes
The country opened its eyes to environmental crimes on Vietnamese soil this year, witnessing a company’s blatant disregard effectively killing a section of the Thi Vai River.
Vedan Viet Nam Co, a Taiwan-invested monosodium glutamate (MSG) producer, was caught red-handed dumping untreated waste into the river in southern Dong Nai Province, killing almost every form of life in the water surrounding the plant.
The company had been pumping waste into the river through a concealed underground pipe system since 1994.
These actions led to immeasurable pollution levels in the river’s waters and surrounding land. Hundreds of households have since launched law suits against Vedan, claiming that the pollution has devastated their aquaculture.
Faced with such an alarming crime, Prime Minister Nguyen Tan Dung released instructions in November that Vedan must follow directives by the Ministry of Natural Resources and Environment or face a complete shut down.
Vedan had its licence suspended, was fined VND267.5 million ($16,718), and charged another VND127 billion ($7.7 million) in over-due environmental protection fees.
"The punishments for Vedan’s violations of environmental protection rules must be implemented strictly and clearly in appropriate steps, to ensure that it will stop dumping waste into the water source, ending the serious environmental pollution and maintaining production," Dung once said.
Scientists held a seminar to see if they could save the polluted river on December 10. The proposals include the development of a mangrove and cajeput forest to absorb pollutants in the water, controlling discharge sources and supervising wastewater discharge, digging an irrigation canal to link Thi Vai with Dong Nai River with the difference in tides diluting the level of pollutants.
While these actions may help buffer the damage, the region will likely suffer for decades, and the incident brought much needed attention to pollution taking place all over the country.
VNS
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